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Are you a millennial? Credit card billings piling up and saving accounts scream zero balance? Well, you are not the only one.

As India is set to become one of the youngest countries in the coming decade, one of the most important areas the generation X needs to address is managing the finances.

Here are a few simple tips every 20 something can follow to improve the financial management skills:

Identify Unnecessary Spending Areas

As a millennial, your spending habits are bound to be unhealthy. Hence, the first step here is to understand where are you burning your money. And then, and learn how to cut down unnecessary expenses.

Giving an example, how does this work - Vijayanand Prabhu, Investment Analyst at Geojit Financial Services says two cigarettes a day can cost INR 30 a day which is INR 900 a month. Unhealthy snacks and excess liquor consumption could add another INR 1000.

Roughly this a sum of INR 2000 invested from the age of 20 till 60 at a return of 10 per cent per annum can fetch INR 1.25 crore on retirement, which would be enough to withdraw INR 60000 per month from the age of 60 till the age of 80 even after considering ongoing inflation costs. “It does not mean to compromise on entertainments. It's just an extra degree of discipline which you can call ‘smartness’ which can help you make your life stress free and simple,” he pointed out

Start Small

There is often a misconception that you need to invest a large chunk of income into your saving. This shouldn’t be the case. You don’t have to start big, instead, start small and let your money grow.

Dinesh Rohira, Founder and CEO, 5nance.com says an underlying factor which a millennial should consider at this age is starting early with their investment even if it accounts for 5-10 per cent of overall income.

“This is because over a period of time even this small savings if diverted to investment can earn a fortune through a compounding effect,” he shares. Additionally, consider topping up in small or equal proportion to the growth in your income and this help you create some extra wealth.

Trying Going Debt Free

Furthermore, millennials are prone to taking loans, credit cards and EMI cards to maintain a certain lifestyle. However, servicing these debts products will surely eat into your save-able income.

“Remember that a small outstanding credit card bill rolls up every month and piles up to a huge amount. Be regular to pay credit cards bills and loans should be taken considering that EMIs should not be more than 40per cent of total income. More importantly millennial should have emergency corpus equivalent to six-month of income,” Rohira shared.

Goal-based Saving

A simple google search of “best financial tips” yields 62,90,00,000 results. And the next question is, which one should you take?

Samant Sikka, Co-Founder, Sqrrl says all these advice are no use to you if they don’t help you in realizing your goals. The entrepreneur feels when it comes to investment practices, one should heed the advice which is more aligned towards your goals.

“Goal-based investing refers to identifying your goals, probably writing them down as well, capping them under the short-term, mid-term and long-term heads and then calculating the amount of money you’d need to achieve these goals. The benefit is that it not only helps you in prioritising your most important goals but also makes you a more disciplined investor,” he adviced

Sec 80C is Your Best Friend

If you haven't befriended section 80C till date – well it time to reconsider your status.

Prabhu from Geojit advice gen X to avoid taking home loans at an early working year and instead consider investing in equity-based investments vehicles that are tax saving investments tools to maximise your income. Under, sec 80c, an individual invest up to INR 1.5 lakhs in an ELSS scheme or Public Provident Fund and save tax on it while you can use the saved amount for a larger goal.

“This has two benefits. One is that you can help yourself pay fewer taxes in your initial years of work life and use this money to fund your dream home or any other family need. Later this helps to reduce EMI burden on the loan later due to higher down payment as well as possible low-interest rates in future. The simple point is that the taxes which you unnecessarily pay can help you build a corpus for yourself in future,” he suggested.

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